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Top Oil Traders See Steady Demand

Top oil traders said Tuesday at the Argus European Crude Conference in Geneva that serious economic headwinds have yet to undermine global oil demand seriously.

Forecasts from senior executives at the world’s largest commodity trading firms may bolster the case for more resilient oil prices, which have dropped by a quarter in the previous three months to roughly $90 per barrel due to recession fears.

The market has been rattled by plunging oil prices and months of severe volatility, with big consuming countries still tapping strategic inventories to temper prices. In contrast, top exporters in the OPEC+ alliance may take the opposite position and increase output this week.

Oil prices rose over $4 per barrel on Monday as OPEC+ discussed cutting output by more than 1M barrels per day to support prices, the largest decrease since the beginning of the COVID-19 crisis.

Brent crude futures for December delivery increased $3.723 to $88.86 per barrel, representing a 4.42% increase. WTI crude in the United States climbed $4.14, or 5.2%, to $83.64 per barrel.

Since June, oil prices have fallen four months in a row as COVID-19 lockdowns in top energy consumer China hampered consumption, rising interest rates, and a strengthening US dollar dragged on global financial markets.

According to a preliminary Reuters poll, crude oil stockpiles in the United States should rise by approximately 2M barrels last week. According to a market source using Genscape data, inventories at storage hub Cushing, Oklahoma, increased by 730,2973 barrels to 29.63M barrels.

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Oil Prices Will Climb Over the Next Nine Months

Asymmetrical upside drivers for oil prices towards the end of the year include long oil with WTI call options expiring in June 2023 at $120 per barrel.

The increasing sanctions against Russia and the EU prohibition on Russian crude oil imports by sea should drive up the price of oil.

Volatility and choppy trading in crude oil futures are predicted to persist, but investors should play the long game and wait for their bet to pay off. Fears of a recession dominate the market mood right now, but investors should look past the initial ‘palsy’ trade and wait for their gamble to pay off.

In response to the OPEC+ meeting on Wednesday, Tran stated that RBC Capital Markets anticipates the alliance will announce a significant cut of between 500,000 and 1M barrels per day (BPD), possibly at the top end of that range.

Oil prices rose more than 4% after rumors surfaced that OPEC+ was planning to reduce 1M BPD or more. Even though OPEC+ has been undershooting its objective by more than 2M barrels per day since June, a cut of 1M barrels per day or more is likely to influence prices.

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The United States and Mexico Will Continue Talks on An Energy Policy

After failing to reach an agreement within the specified time frame, the United States and Mexico will continue discussions to resolve an energy policy conflict.

The US sought negotiations earlier this year as part of the US-Mexico-Canada Agreement. The issue for Washington was Mexico’s determination to return market control to state-owned businesses, prioritizing them above private competitors in the energy industry, including US firms. Canada also objected to Mexico’s energy policies.

The Mexican Economy Ministry supported our partners’ desire to continue progressing through conversation and that “without prejudice to the rights afforded under the USMCA, we aspire to continue collaborative efforts to discover a mutually suitable solution.”

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